After burgers, McDonald’s franchise to serve coffee

After burgers, Hardcastle Restaurants, the master franchise for west and south India operations of McDonald’s, wants to gain a mindshare in India for the American fast-food chain’s beverages as well.

The company has brought its coffee retail format McCafé to India and wants to strengthen its footprint in this segment as well. In the next three to five years, there are plans to set up some 75-150 McCafés across the country, says Smita Jatia, director, Hardcastle Restaurants ( McDonald’s India-West and South). McCafé is McDonald’s most successful global brand extension and the in-house coffee style chain has a presence in some 13,000 restaurants across the globe. At present, McDonald’s serves beverages under Coca-Cola’s brand of Georgia tea and coffee. At present, the organised café market is pegged at $230 million and is likely to touch $410 million by 2017, according to Technopak Advisors. This is expected to grow at 13-14 % y-o-y over the next five years.

Internationally, McCafés are housed within McDonald’s outlets but have a separate look and feel, the same format will be followed in India, Jatia said. McCafés will occupy around 500-sq-ft space within a typical 4,000-sq-ft McDonald’s store here in India.

“ There are no plans to establish stand-alone stores since it has not worked internationally for McDonald’s and fits into our strategy for India,” she said. Other coffee chains in India such as Starbucks, Café Coffee Day, Barista and Costa Coffee have grown aggressively. The coffee shop chains continue to record the highest current value growth, registering an increase of 19% in 2013, according to market estimates.

McCafé is the third line-extension for McDonald’s in India after it added McDelivery and Dessert Kiosks in the last few years. The store-in-store format enables a quick roll-out of McCafé with an investment of R30-35 lakh per outlet . In one year, the company has expanded its McCafé network across 27 restaurants in four cities — Mumbai, Ahmedabad, Nashik and Pune.

Hardcastle operates as many as 191 McDonald’s outlets and is looking to touch 250 restaurants over the next three to five years. In 2011, Hardcastle acquired the 50% stake held by the American parent, giving it full financial control to speed up expansion. While Hardcastle has been growing 25% annually, McDonald’s partner in north and east, Connaught Plaza Restaurants led by Vikram Bakshi, has been dragged to the Company Law Board.